David Cameron last night warned the nation to “prepare for the possibility of further bad news” on the number of casualties from these shores.

Whitehall revealed there could be “multiple British casualties”.

The PM said: “We face a very bad ­situation at this gas compound. A number of British citizens have been taken hostage. Already we know of one who has died.”

Foreign Office minister Alistair Burt warned of “sad and depressing news” and that the public should “expect the repatriation of bodies”.

And details emerged of the PM’s ­reaction when he heard Algerian government forces had stormed the siege site.

He reportedly said: “Please no, oh my God, what are they doing.”

Security forces in Algeria believe 35 hostages were killed and 15 terrorists in the bloodbath after the helicopter was ordered to attack amid fears those held captive were about to be executed.

It was thought just seven workers, including Stephen McFaul, 36, of Belfast, managed to flee.

The operation by ­Algerian military to gain control of the site ended last night.

A Whitehall source said: “It is feared that as yet unconfirmed reports of as many as 35 dead of all nationalities will prove to be correct.”

Shortly after the attackers took control of the In Amenas plant deep in the Sahara desert one phoned a newspaper and said: “We will kill all the hostages if the army try to storm the area.”

One hostage, identified as a Briton, was quoted in local media calling for ­negotiations to “spare any loss of life”.

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Scene: The oil fields in Algeria

He said: “We are receiving care and good treatment from the kidnappers. The [Algerian] army did not withdraw and they are firing at the camp.”

Before the rescue attempt started Stephen revealed the jihadist yobs had ­threatened to murder hostages unless their demands for the Algerian army who were surrounding the plant to withdraw were made public.

Mr Cameron was furious he had not being informed in advance by officials there that the rescue mission would take place.

The shootout was triggered when the Africa-based al-Qaeda gunmen tried to move their captives to another area within the complex.

Survivors yesterday told how they barricaded ­themselves in rooms within the plant to hide from the gunmen.

The brother of hostage Stephen was on the phone to him when gunfire was heard in the background.

Brian McFaul lost contact during the chaos, but several hours later received a phone call from Stephen who said he had been captured.

Around 20 gunmen had overrun the complex close to the Libyan border in a dawn attack and swarmed a bus taking workers to an airport at the edge of the plant.

The siege was said to be in revenge for French ­involvement in ­neighbouring Mali.

Government sources yesterday revealed ­Algerian authorities had refused an offer by the British to send in the SAS.

The group claiming responsibility – called Katibat Moulathamine or the Masked Brigade – captured more than 40 foreigners, including seven Americans, in the attack on Wednesday. A Brit and an Algerian were killed at that time.

How the mission unfolded

The ­kidnapping was one of the largest attempted by a militant group in North Africa.

Sometime yesterday a number of hostages, including Americans, managed to flee the compound.

Algerian troops had surrounded the isolated gas plant, 800 miles south of the capital Algiers, shortly after the siege began.

State radio said yesterday 30 local workers managed to escape from the plant, but hundreds of others had already been released by the kidnappers.

Interior Minister Daho Ould Kabila revealed the cowardly militants had hoped to negotiate their departure away from the area – a notion he rejected.

He said earlier, as the siege went on: ­“Security forces have surrounded the area and cornered the terrorists, who are in one wing of the complex’s living quarters.”

He told how the 20 well-armed gunmen were Algerian and under orders from Moktar Belmoktar, al-Qaeda’s strongman in the Sahara.

One-eyed jihad veteran Belmokhtar – nicknamed Mr Marlboro because of his skill at cigarette smuggling – is thought to have planned the siege.

Yves Bonnet, former head of France’s spy service, dismissed the idea the operation was specifically linked to the French action in Mali due to the amount of organisation it involved.

He said: “It was conceived well in advance, ­spectacular and needing a lot of ­preparation ... It was not at all an ­improvised operation.

"The operation was probably already scheduled and simply getting all those people into the desert would take several days.”

Foreign Secretary William Hague has dispatched a team to Algeria to help at the British embassy there.

He cut short a trip to Australia to return to deal with the crisis.

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Mr Marlboro: One-eyed jihadi veteran Belmokhtar

Mr Hague said: “It is absolutely ­unacceptable, of course. It is, in this case, the cold-blooded murder of people going about their business.

"So there is no excuse, whether it be connected to Libya, Mali or anywhere else.”

Yesterday the Government had been in talks throughout the night with the US and France over whether they could help against the ­militants. BP, the ­Norwegian company Statoil and the Algerian state oil company ­Sonatrach, operate the gas field.

BP said it would not ­identify staff members who were taken hostage for security reasons.

The firm’s CEO Bob Dudley added: “All our efforts are focused on supporting the authorities to secure a peaceful ­resolution of the situation and the safe return of our colleagues and all other workers being detained.”

Statoil officials last night said 12 of its employees were captured – nine ­Norwegians and three locals.

Japanese media reported at least three Japanese among the hostages and the Malaysian government confirmed two of its citizens were taken.

It was the largest haul of hostages since 2003 when the radical group that later evolved into al-Qaeda in North Africa snatched 32 Western tourists.